TMI Blog2014 (4) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... o consideration the nature of work so as to hold that they are covered by Entry No.4 only - The order of the Tribunal is not only incomplete but it is perverse. Classification of "Fabrication" and "external structural works" - Entry 4 of the Sixth Schedule - Interpretation of Statute – Held that:- The expressions "fabrication" and "external structural works" are not defined in the Act - The structural glazing is not only fixing glasses so as to enhance the aesthetic quality and outlook of the building - Structural glazing, glass glazing etc. could be a substitute to external wall and if that be so, it would fall in the category of "structural works" as contemplated by Entry 4 - The Tribunal has not considered whether the nature of works executed by the assessees would fall under any other entry as was considered by the Assessing Authority and the appellate authority. Merely because, the assessees also undertakes to construct cabins in empty halls, it cannot be stated that it is a part of structural works and it amounts to structural works within the meaning of Entry 4 - This in opinion of this Court, would amount to interior work done for the client by the assessees - The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Commissioner of Commercial Taxes (Audit)-2, DVO, Mangalore, being Assessing Authority, (for short the AA ). Vide order dated 26th March 2007, the AA passed re-assessment order under Section 39(1) of the Act and directed the respondent-assessees to pay additional tax, interest and penalty for the tax periods between April, 2006 and November, 2006. 3. In the second set of Revision Petitions i.e., STRP Nos.17/2010 2 to 21 of 2014, the petitioner-State of Karnataka impugned the order dated 8th February 2010 passed by the Tribunal in STA Nos.2102-2122/2009. The Sales Tax Appeals, before the Tribunal, filed by the respondent-assessee i.e. M/s. S.P. Fabricators Private Limited (for short M/s. S.P. Fabricators ), under Section 62(6) of the Act, were directed against the orders made by the FAA dated 26-10-2009 in appeal Nos.VAT/AP-191-243/09-10. Those appeals were against the re-assessment order dated 15-5-2009 passed by the AA under Section 39(1) of the Act. By this order, the AA also levied penalty under Section 72(2) and interest under Section 36(1) of the Act for the tax period from May 2006 to March 2008. In short, the AA directed M/s. S.P. Fabricators to pay additional tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of tax liability. Further, the Assessing Authority levied interest under Section 36 of the Act, on the difference of the output tax payable by the assessees. 9. Thus, from the orders passed by the authorities below including the order of the Tribunal, the question that arise for our consideration on the facts and in the circumstance of the case and in law is, whether the Assessing Authority was justified in holding that the nature of works contract executed by the assessees, were composite contracts, and, therefore, would fall under Entry 23 in the Sixth Schedule of the Act and not only under Entry 4 thereof. In other words, it is necessary to decide whether the transaction/nature of works contracts, executed by the assessees were composite contracts and are, therefore, covered by Entry 23 or having regard to nature of works it is covered only by Entry 4 in the Sixth Schedule of the Act. 10. Before we consider the orders of the AA and FAA, it would be relevant to have a glance at the relevant provisions of the Act and at the entries in the Sixth Schedule, so as to find out whether approach of the Tribunal in dealing with the case was correct/justified. 11. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ories Four percent 23 All other works not specified in any of the above categories including composite contracts with one or more of the above categories Twelve and one half percent Entry 3 in the Sixth Schedule, provides for works contract of electroplating, electro-galvanising, anodizing and the like. In the present case some material used by the assessee was either electroplated or electro-galvanised or anodized. There is no finding recorded by the Tribunal whether it was done by them or they procured it from the market. Entry 4 provides for works contract of fabrication and erection of structural works including fabrication, supply and erection of iron trusses, purlines, etc. Entry 22 speaks about composite contracts involving two or more of the above (Entry 1 to 21) categories. Entry 23 is a residuary entry which provides that all other contracts not specified in any of the above (Entry 1 to 22) categories including composite contracts with one or more of the categories enumerated in Entries 1 to 22. Different rates of tax are provided for different Entries such as 4% for Entry Nos.3, 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnected invoices, classified the works contract executed by the assesses, on the basis thereof, as follows: Glazing/external cladding works contract which are of two types. ACP cladding and glazed glass cladding. ACP cladding is the abbreviated description of ' aluminium composite panel external cladding' in which aluminium panels coated with PVDF are fixed on rectangular aluminium frames which in turn are fastened to the supporting RCC bases, pillars, roof edges etc., of the concerned building with galvanized iron fastener clamps top create structures known as ' curtain walls' which serve as external walls of buildings. In the second type of glazing, glazed glass sheets of sufficient strength are bonded to rigid rectangular aluminium frames which in turn are fastened to the supporting RCC bases, pillars, roof edges etc., of the concerned building with galvanized iron fastener clamps. As a result of which a curtain wall made of glass/aluminium and steel is erected to serve as the external wall of the concerned building. 14. The works contract of M/s.Mathias are concerned, classified by the Tribunal as follows: Structural works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Authority has taken trouble of referring to dictionary meaning of several words such as structural and glazing . Further we find that the Assessing Authority has also considered the word composite as employed in the Sixth Schedule, in particular, in Entry Nos.22 and 23 thereof. It has analysed and compared the works contract and the type of works contract undertaken by the assessee for different clients. After considering every individual works contract between the assessees with their clients including connected invoices and receipts from works contracts in the last paragraph of the order drawn its conclusions as follows : '1. The works contract undertaken by the assessee are in the nature of STRUCTURAL GLAZING , SUSPENDED GLAZING , CURTAIN WALLING , ACP CLADDING , FIXED GLAZING and fixing of aluminium glass doors windows and related work falling under Entry 23 of VI Schedule to KVAT Act, 2003 liable to tax at 12.5%. 2. The woks contract executed by the assessee is a composite works contract comprising of works relating to fabrication and supply of aluminium glass panels, fabrication and erection of MS Structure, anodizing and powder coa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of structural work. 9. The pictorial evidences provided by the assessee and pictorial depiction of the works contract executed by the assessee reveals that the contracts are to provide glazing to the civil structure not to erect any structural work. 10. The works contract orders are for the execution of works contract of GLAZING WORKS not for any fabrication, erection of structural work. Therefore, the dominant feature of the works contract is GLAZING to the civil structure not fabrication and erection of structural work.. 11. The proceedings of the other case cannot be the basis for the assessee to determine the nature of works contract and admit the tax liability. 12. The website of the company www.spfab.net and the works contract orders clearly declare that, the works contract executed by the assessee company are in the nature of GLAZING WORKS and not fabrication, erection of structural work. Therefore, the dominant feature of the works contract is GLAZING to the civil structure not fabrication and erection of structural work. Therefore the contentions raised by the assessee are not correct. Hence tax at 12.5% is hereby levied. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the category of structural works as contemplated by Entry 4. It would not be correct to state that erection of structural works as contemplated by Entry 4 would only mean erection of load bearing structures. As against this any works, such as ACP cladding and glass cladding on the existing wall, which only enhances aesthetic look or beauty/outer look of the building, as a substitute to conventional painting, in our view, would not fall in the category of structural works as contemplated by Entry 4. 21. The expression structural work as occur in Entry No.4 needs to be considered and understood so as to record a categoric finding whether any part of the works contract in the present case could be called structural works so as to find out whether it is covered by Entry 4 and, further to consider whether every work of glass cladding and ACP Cladding could also fall in the category of structural works. In other words, if such work is done only for enhancing aesthetic look/outer look of the building and not as substitute to external walls it cannot be treated as structural works within the meaning of the expression used in Entry No.4. The Tribunal has not considered whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffirming the order of the AA in the concluding paragraph observed thus: In the instant case the appellant undertakes not only the work contract of erecting aluminium partition he also undertook the contract work of fixing the furnitures work contract of interior decoration and works contract of fitting, Air conditions. Advance rulings given in respect of particular work contract differs from the works contract under taken and executed by the appellant. The works contract under taken and executed by the appellant certainly falls under entry No.23 of sixth schedule to KVAT act 2003 and for tax at 12.5% from 1-4-2006 onwards. Advance rulings cannot come to the rescue of the appellant because facts are different. The orders passed by the respondent authority are sustainable and hence they are upheld. Levy of penalty u/s 72(2) by the respondent authority is in accordance with KVAT Act 2003. I find no reason to interfere with the order passed by the respondent authority. 23.2 The Tribunal after considering the relevant entries namely, Entry Nos.4, 23 in the Sixth Schedule to the Act in concluding paragraphs 10, 11 and 12 observed thus: 10. In the Taxatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not find any whisper in the order of the Tribunal of having considered whether any part of the contracts executed by the assessees would fall under Entry 3 or any other entry for that matter coupled with the works not covered by any other categories in Entries 1 to 21. It has also not recorded any reason for either setting aside the findings recorded by the authorities below, holding the works contract as composite works contract or for disagreeing with such view. In the circumstances, we are of the considered opinion that the order of the Tribunal deserves to be set-aside and remand the matter to the Tribunal for its consideration afresh. Hence we pass the following order: The impugned orders dated 20.10.2009 and 08.02.2010 passed by the Tribunal are set-aside and the appeals, disposed of by the Tribunal, are restored to file. The Tribunal shall endeavour to dispose of the appeals afresh, on merits and accordance with law, as expeditiously as possible and preferably within a period of eight months from the date of receipt of this order. The Tribunal, while deciding the appeals afresh shall do so in the light of the observations made in this judgment. All contentions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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